Sterling gold price hits new high

The gold price has hit a new all-time high in sterling terms as concerns about
a hung parliament in Britain.

The gold price has hit a new all-time high in sterling terms as concerns about a hung parliament in Britain and the debt crisis in Greece weighed on the pound.

Gold hit £773 an ounce last week, a rise of around 25pc over the past year. Bullion also surged in dollar terms too, hitting $1,181/oz on safe haven demand.

There has now been little let-up in demand for gold since the start of the year.

Juan Carlos Artigas of the World Gold Council said the recent gold price increase was achieved despite strong performance from the US dollar and stock markets, even though it is often assumed that there is a negative correlation between the gold price and equities.

James Moore, analyst at thebulliondesk.com, said: "Gold looks set to be driven by further safe-haven investment demand. Gold prices have rallied and is on course to challenge the $1,200/oz barrier."

Gold has a history of doing particularly well in the UK in election years and some investors are buying it as insurance against the volatility that would be caused by a hung parliament. The metal has performed more solidly than equities in the last decade. While the FTSE 100 remains below its level of 10 years ago, the sterling price of gold has soared by more than 320pc.

Demand from investors recently overtook demand for gold jewellery for the first time since 1980, thanks in part to investors getting exposure to gold through exchange-traded funds, which allow investors to bet on the price of commodities without owning them outright.

Record low interest rates have also resulted in British investors looking at alternative ways of getting a return on their money.

With the Retail Prices Index rising at 4.4pc in the year to March and the Bank Rate frozen at 0.5pc – and many bank accounts paying less than that – cash savers have lost nearly 4p in the pound during the last year in terms of reduced purchasing power.

Adrian Ash, head of research at BullionVault, said: "The latest inflation figures show that savers in bank deposits have been hammered. People say that today's low interest and inflation rates mean things are not so bad for savers as they were 30 years ago."

He added: "But the net outcome is the same. In 1980, base rates were at 17pc and the cost of living was rising at 21pc. Just like in those bad old days, cash savers today are losing 4pc a year."

The Telegraph Investor

Editor's comment:

Priced to be great value for new investors and those with large portfolios.